Fanning and Moniz on Kemper: Nothing to See Here

It would be hard to find an image of a cozier relationship between a giant energy company and a regulator than the joint appearance in Philadelphia on July 28th by Southern Company’s Tom Fanning and U.S. Secretary of Energy Ernest Moniz.

Moniz and Fanning kidded each other like old pals at a Bipartisan Policy Center energy forum as they discussed their common view that the United States needs to aggressively pursue carbon capture and sequestration for coal-fired power plants – like Southern’s Kemper project in Mississippi – to keep coal in the mix as a fuel for as long as possible.

But Moniz flatly refused to answer specific questions about charges raised in a front-page New York Times investigation in early July that Southern deliberately misled investors and its customers about when the Kemper plant would enter service, allegations that the Securities and Exchange Commission is also investigating.

The Department of Energy helped Kemper get off the ground with a $270 million grant in 2008, and in April, awarded Southern another $137 million to lessen what has already been a substantial rate impact on the 23 largely poor, rural Mississippi counties that are having to pay for a substantial part of Kemper’s cost, which has ballooned to $6.8 billion from an initial budget of $2.4 billion.

Former Kemper manager Brett Wingo, who first raised the issue of schedule irregularities inside the company and then became a key source for the New York Times story, has claimed, supported by others, that the project management software used to plan the building of the plant was deliberately altered to make it seem like Kemper was on schedule when in fact it was at least two years behind.

Citizen Moniz

Asked by this reporter whether he thought the DOE’s inspector general should investigate Kemper and DOE’s relationship with Southern in light of the Times’ piece and the SEC’s fraud inquiry, which could result in criminal penalties for violation of federal laws on internal financial controls and financial reporting, Moniz refused to answer, saying he was appearing at the Bipartisan Policy event as a private citizen, not in his official capacity as energy secretary.

Fanning dismissed the Times story, and said Wingo’s charges were investigated twice, first internally, and then by the Jones Day law firm, and found to be without merit. Southern has not released the details of either investigation.

“The New York Times chose not to include the other side of the story,” said Fanning.

As to the SEC investigation, Fanning said that Southern has “already disclosed in our financials, blessed by our auditors, that it’s not material,” and insisted that “it shouldn’t concern you as an important fact to your current or prospective investment.”

Wingo has called the Southern company-sponsored investigations “deliberate whitewashes.” Wingo is an engineer who worked on the Kemper project for eight years, playing a key role in the construction of the 582-megawatt power plant’s gasifier, a kind of reactor that heats coal at high pressure to produce a synthesis gas which is then used to run turbines to produce electricity.

A not-so-definite start-up date

Those turbines have been generating power since August 2014, but have been running on ordinary natural gas. In its most recent SEC statement on July 25th, Southern continued to claim the plant will switch over to synthesis gas as its fuel and go on-line as a fully functional power plant on September 30th.

Asked why anyone should believe that date will hold when there have already been several “definite” start-up dates, Fanning admitted, “It’s not iron-clad.”

“That’s our current disclosure. Our current belief is, yeah, we could do this on the 30th. But the next two weeks will tell us a lot.”

Both Wingo and another Kemper engineer have said they believe there are so many untested and first-of-a-kind systems that haven’t yet been debugged that it is unlikely the plant will be on-line before 2017, most likely late 2017.

“THE SQUEEZE IS ON”

The question of whether DOE and Southern have gotten a little too friendly was raised in the Timesarticle.

That notion gets a lot of support in documents provided by DOE in response to a Climate Investigations Center open records request. The documents – emails, memoranda and other material – show that Southern took advantage of high-level access to DOE’s then-Secretary Samuel Bodman to get the project, originally begun in Orlando as a more conventional coal plant, transferred to Kemper County, Mississippi where it doubled in size, budget and complexity as it morphed into a carbon capture and sequestration facility.

More recently-released documents show Southern exerting enormous pressure to win approval and funding for Kemper, leading one DOE official to exclaim in an email to a colleague in March 2007, “HEADS UP. THE SQUEEZE IS ON.”

In fact, the documents show, the pressure seemed matched by DOE’s willingness to grant Southern carte blanche in getting almost everything it wanted, from a waiver on repayment of DOE monies to removing restrictions on Southern’s licensing of proprietary technology used at Kemper.

Fanning and Moniz seem to embody that spirit of collaboration in an especially chummy relationship.

“He and I are kind of a tag team.” Fanning acknowledged in Philadelphia last week.

Moniz and Fanning have spent a great deal of time together over the last several years, appearing in Turkey and other foreign countries to promote the licensing of the Kemper technology, often making it sound like the plant is actually a functioning example of carbon capture when it is still some time away from producing electricity from “clean” coal.